Question

What is the relationship between the Stackelberg model and the dominant-firm-competitive-fringe model?

Answer 1

Stackelbeng model :- Stackelbeng model is a leadership model Which allows Firm dominand in the mark of to sel ils price first and subsequently the followen Firm optimize their production and price it was formulated by Heinnich von Stackelbing in 1939 unden Standing the stacked beag (Graphically) An Important genesis of this model is that one of the stackelbeng leaders Produces more output than it would have produced under the Counnol equi- -librium. Similarly, the followen in stack- -elbung model produces less output than that in the courenok model. Assuming x- axis Represents the production of firm & and y-axis For the production of Firm B FERM A curve o Qa da OA It firm & assumes itself as the stackelburg leader and B as the followen, it will produce Qo' quantity. In consequence , Firm B tollows With so that is the best it can Maximize rep to. Police that as is the stackelbeng equilibrium point where the firm produces more than what it could produce at ac Which is the courton eq uilibrium point. Similarly, when firma

follows atlen firm has taken output do- - ciston, firm B poodnies much less than what it could have had it been a count on game. The dominant Firm model :- - The dominand film model is the model that is some oligopol. istic markets, one lange firm has a major Shane of total sales and a group of smallen firms supplies the remainden of the marked. In some highly concentra- ted in ous fried a single dominant firm seares a majority of the market and a group of smaller (Fringe) firm supply the rest. Man din (1994) summarizes the diffenend Bedween a monopolist and a dominant firm as follows - We need to ex amine how the dominand firem and its competitive fringe determine output. In the graph , we denive the residual demand cunre- facing the dominand Firm d) - from the me or supply curve of the fringe (MCE) and market demand (Dmit). That is we find the new' demano cuare faced by the dominant firm when the market is shared with a competitive Fringe MCE qf qm qe Raxt

stacket side of the frings look The paper binding contrack open look stackel bung equilibrium in the fringe model of the supply side of a market for a rand man -tercial from an exhustible natural Resource is Recensiofered. it is shown that the equili. brium for this model differs from what the previous literature on this model suggests, in particulan equilibrium price trajectory can display discontenuties! terial apply